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Spatial panel models for the analysis of land prices

Listed author(s):
  • Saguatti, Annachiara
  • Erickson, Kenneth
  • Gutierrez, Luciano
Registered author(s):

    The paper investigates the determinants of cropland value in 12 selected Midwestern U.S.A. States in the years 1971- 2009. We adopt the Ricardian Present Value Model (PVM) as the theoretical framework, and therefore focus on the relationship between land value and cash rents, expecting to find a positive one. In order to model the spatial effects that characterize the data, we estimate a spatial dynamic panel data model with fixed individual effects. The employed dataset represents an improvement with respect to earlier studies because it refers to a rather homogeneous sample of States and only to cropland rather than farmland in general, and also excludes the value of buildings from the value of farmland. Also, net, rather than gross, cash rents per acre of cropland are used, as this reflects the net return to the landowner. Our results allow the computation of short and long run cropland value elasticity to cash rents, whose close-to-1 value appears to support the PVM. We also highlight the importance of taking spatial effects into consideration when addressing this field of analysis.

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    File URL: http://purl.umn.edu/172997
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    Paper provided by Italian Association of Agricultural and Applied Economics (AIEAA) in its series 2014 Third Congress, June 25-27, 2014, Alghero, Italy with number 172997.

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    Date of creation: 2014
    Handle: RePEc:ags:aiea14:172997
    Contact details of provider: Web page: http://www.aieaa.org/

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    3. Sergio H. Lence & Ashok K. Mishra, 2003. "The Impacts of Different Farm Programs on Cash Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 753-761.
    4. Ian W. Hardie & Tulika A. Narayan & Bruce L. Gardner, 2001. "The Joint Influence of Agricultural and Nonfarm Factors on Real Estate Values: An Application to the Mid-Atlantic Region," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 120-132.
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    6. Yu, Jihai & de Jong, Robert & Lee, Lung-fei, 2008. "Quasi-maximum likelihood estimators for spatial dynamic panel data with fixed effects when both n and T are large," Journal of Econometrics, Elsevier, vol. 146(1), pages 118-134, September.
    7. Plantinga, Andrew J. & Lubowski, Ruben N. & Stavins, Robert N., 2002. "The effects of potential land development on agricultural land prices," Journal of Urban Economics, Elsevier, vol. 52(3), pages 561-581, November.
    8. A. Tegene & F. Kuchler, 1993. "A Regression Test Of The Present Value Model Of Us Farmland Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 135-143.
    9. Michael J. Roberts & Barrett Kirwan & Jeffrey Hopkins, 2003. "The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 762-769.
    10. Matthew Salois & Charles Moss & Kenneth Erickson, 2012. "Farm income, population and farmland prices: a relative information approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 39(2), pages 289-307, April.
    11. Barry K. Goodwin & Ashok K. Mishra & François N. Ortalo-Magné, 2003. "What's Wrong with Our Models of Agricultural Land Values?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 744-752.
    12. Tim Phipps, 2003. "Discussion of Agricultural Land Values, Government Payments, and Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 770-771.
    13. Luciano Gutierrez & Joakim Westerlund & Kenneth Erickson, 2007. "Farmland prices, structural breaks and panel data," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(2), pages 161-179, June.
    14. Alfons Weersink & Steve Clark & Calum G. Turvey & Rakhal Sarker, 1999. "The Effect of Agricultural Policy on Farmland Values," Land Economics, University of Wisconsin Press, vol. 75(3), pages 425-439.
    15. Tom Engsted, 1998. "Do farmland prices reflect rationally expected future rents?," Applied Economics Letters, Taylor & Francis Journals, vol. 5(2), pages 75-79.
    16. Xiaodong Du & David A. Hennessy & William M. Edwards, 2007. "Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory," Center for Agricultural and Rural Development (CARD) Publications 07-wp454, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    17. Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers Archive 11093, Iowa State University, Department of Economics.
    18. Breustedt, Gunnar & Habermann, Hendrik, 2008. "Determinants of agricultural cash rents in Germany: A spatial econometric analysis for farm-level data," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44462, European Association of Agricultural Economists.
    19. Barrett E. Kirwan, 2009. "The Incidence of U.S. Agricultural Subsidies on Farmland Rental Rates," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 138-164, 02.
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